Operational Performance Drives Strong
Profitability
Rogers Corporation (NYSE:ROG) today announced financial results
for the second quarter of 2020.
“As the result of strong operational performance and favorable
product mix, second quarter gross margin and adjusted earnings per
share exceeded the top end of our guidance expectations,” stated
Bruce D. Hoechner, Rogers' President and CEO. “These solid results
were driven by continued progress on our cost improvement roadmap,
including timely actions in response to the challenging
macro-environment. In the near-term our focus continues to be on
the health and safety of our employees and supporting our global
customers. In addition, we are focused on accelerating our plans to
capitalize on the significant growth opportunities in Advanced
Mobility markets, while we continue to pursue opportunities in
Advanced Connectivity markets.”
Q2 2020 Financial
Overview
GAAP Results
Q2 2020
Q1 2020
Q2 2019
Net Sales ($M)
$191.2
$198.8
$242.9
Gross Margin
36.6%
33.0%
35.3%
Operating Margin
11.0%
8.8%
13.7%
Net Income ($M)
$14.5
$13.3
$24.3
Earnings Per Share
$0.78
$0.71
$1.30
Non-GAAP Results1
Q2 2020
Q1 2020
Q2 2019
Adjusted Operating Margin
15.4%
11.3%
17.2%
Adjusted Net Income ($M)
$21.1
$17.2
$30.7
Adjusted Earnings Per Share
$1.13
$0.92
$1.64
Adjusted EBITDA ($M)
$42.5
$33.4
$53.1
Adjusted EBITDA Margin
22.2%
16.8%
21.9%
Net Sales by Operating Segment
(dollars in millions)
Q2 2020
Q1 2020
Q2 2019
Advanced Connectivity Solutions
(ACS)
$70.9
$64.6
$92.5
Elastomeric Material Solutions
(EMS)
$71.6
$83.5
$93.9
Power Electronic Solutions
(PES)
$45.2
$46.7
$51.7
Other
$3.4
$4.0
$4.8
1 - A reconciliation of GAAP to non-GAAP measures is provided in
the schedules included below
Q2 2020 Summary of
Results
Net sales of $191.2 million decreased 3.8% versus the prior
quarter, due to the impact of COVID-19 on demand across most
markets. EMS and PES segment sales declined sequentially and were
partially offset by higher ACS sales. EMS net sales declined in the
general industrial and consumer markets, including portable
electronics, partially offset by stronger sales in the EV/HEV
battery market. PES net sales decreased in the traditional
automotive and EV/HEV markets, partially offset by higher sales in
the industrial power and mass transit markets. ACS net sales
increased in the wireless infrastructure and aerospace and defense
markets, partially offset by lower sales in the ADAS market.
Currency exchange rates unfavorably impacted total company net
sales in the second quarter of 2020 by $1.1 million compared to
prior quarter net sales.
Gross margin was 36.6%, compared to 33.0% in the prior quarter.
The increase in gross margin was due to favorable product mix,
operational cost savings and a $3.3 million benefit from the
expected recovery of previous duty taxes paid, following a change
in Chinese tariff regulations. These items were partially offset by
higher COVID-19 related costs and inventory reserves. COVID-19
related costs, which were primarily associated with temporary
employee compensation and benefits, reduced gross margin by $3.0
million in Q2.
Selling, general and administrative (SG&A) expenses
increased by $1.4 million sequentially to $41.7 million, primarily
due to higher accelerated intangible amortization expense, which
was partially offset by lower employee related expenses from cost
containment efforts and reductions in travel and other expenses
stemming from COVID-19 restrictions. $3.9 million of accelerated
intangible amortization expense was incurred in Q2, related to the
Company's DSP business, and an additional $11.7 million of
accelerated expense is expected to be recognized in both the third
quarter and fourth quarter of 2020.
GAAP operating margin of 11.0% increased by approximately 220
basis points sequentially. Adjusted operating margin of 15.4%
increased by approximately 410 basis points versus the prior
quarter.
GAAP earnings per share were $0.78, compared to earnings per
share of $0.71 in the first quarter of 2020. The sequential
improvement in GAAP earnings resulted from improved gross margin,
partially offset by higher SG&A and tax expense. On an adjusted
basis, earnings were $1.13 per diluted share compared to adjusted
earnings of $0.92 per diluted share in the prior quarter. The
increase in adjusted earnings primarily resulted from the improved
gross margin, partially offset by higher tax expense.
The Company generated strong free cash flow of $39.3 million in
the second quarter of 2020. Ending cash and cash equivalents was
$298.7 million, a decrease of $9.5 million versus the prior
quarter. Net cash provided by operating activities of $46.3 million
was offset by a $50.0 million principal payment made on the
outstanding borrowings under the Company’s revolving credit
facility and capital expenditures of $7.0 million. At the end of
the second quarter of 2020, cash exceeded borrowings by $75.7
million. Subsequent to the end of the second quarter the Company
made an additional $125 million principal payment on the
outstanding borrowings under its revolving credit facility.
Financial Outlook
Q3 2020
Net Sales ($M)
$175 to $190
Gross Margin
35.0% to 36.0%
Earnings Per Share1
$0.19 to $0.39
Non-GAAP Earnings Per Share2
$0.90 to $1.10
2020
Effective Tax Rate
25% to 26%
Capital Expenditures ($M)
$40 to $45
1-
Includes $11.7 million of accelerated
intangible amortization expense associated with the DSP
business
2-
A reconciliation of GAAP to non-GAAP
measures is provided in the schedules included below
About Rogers Corporation
Rogers Corporation (NYSE:ROG) is a global leader in engineered
materials to power, protect, and connect our world. With more than
180 years of materials science experience, Rogers delivers
high-performance solutions that enable the company’s growth drivers
-- advanced connectivity and advanced mobility applications, as
well as other technologies where reliability is critical. Rogers
delivers Power Electronics Solutions for energy-efficient motor
drives, e-Mobility and renewable energy; Elastomeric Material
Solutions for sealing, vibration management and impact protection
in mobile devices, transportation interiors, industrial equipment
and performance apparel; and Advanced Connectivity Solutions for
wireless infrastructure, automotive safety and radar systems.
Headquartered in Arizona (USA), Rogers operates manufacturing
facilities in the United States, China, Germany, Belgium, Hungary,
and South Korea, with joint ventures and sales offices
worldwide.
Safe Harbor Statement
This release contains forward-looking statements, which concern
our plans, objectives, outlook, goals, strategies, future events,
future net sales or performance, capital expenditures, future
restructuring, plans or intentions relating to expansions, business
trends and other information that is not historical information.
All forward-looking statements are based upon information available
to us on the date of this release and are subject to risks,
uncertainties and other factors, many of which are outside of our
control, which could cause actual results to differ materially from
the results discussed in the forward-looking statements. Risks and
uncertainties that could cause such results to differ include: the
duration and impacts of the novel coronavirus global pandemic and
efforts to contain its transmission, including the effect of these
factors on our business, our customers and economic conditions
generally; failure to capitalize on, volatility within, or other
adverse changes with respect to the Company's growth drivers,
including advanced mobility and advanced connectivity, such as
delays in adoption or implementation of new technologies; uncertain
business, economic and political conditions in the United States
and abroad, particularly in China, South Korea, Germany, Hungary
and Belgium, where we maintain significant manufacturing, sales or
administrative operations; the trade policy dynamics between the
U.S. and China reflected in trade agreement negotiations and the
imposition of tariffs and other trade restrictions, including trade
restrictions on Huawei Technologies Co., Ltd.; fluctuations in
foreign currency exchange rates; our ability to develop innovative
products and the extent to which our products are incorporated into
end-user products and systems and the extent to which end-user
products and systems incorporating our products achieve commercial
success; the ability of our sole or limited source suppliers to
deliver certain key raw materials, including commodities, to us in
a timely and cost-effective manner; intense global competition
affecting both our existing products and products currently under
development; business interruptions due to catastrophes or other
similar events, such as natural disasters, war, terrorism or public
health crises; failure to realize, or delays in the realization of
anticipated benefits of acquisitions and divestitures due to, among
other things, the existence of unknown liabilities or difficulty
integrating acquired businesses; our ability to attract and retain
management and skilled technical personnel; our ability to protect
our proprietary technology from infringement by third parties
and/or allegations that our technology infringes third party
rights; changes in effective tax rates or tax laws and regulations
in the jurisdictions in which we operate; failure to comply with
financial and restrictive covenants in our credit agreement or
restrictions on our operational and financial flexibility due to
such covenants; the outcome of ongoing and future litigation,
including our asbestos-related product liability litigation;
changes in environmental laws and regulations applicable to our
business; and disruptions in, or breaches of, our information
technology systems. For additional information about the risks,
uncertainties and other factors that may affect our business,
please see our most recent annual report on Form 10-K and any
subsequent reports filed with the Securities and Exchange
Commission, including quarterly reports on Form 10-Q. Rogers
Corporation assumes no responsibility to update any forward-looking
statements contained herein except as required by law.
Conference call and additional
information
A conference call to discuss the results for the second quarter
of 2020 will take place today, Thursday, July 30, 2020 at 5pm
ET.
A live webcast of the event and the accompanying presentation
can be accessed on the Rogers Corporation website at
https://www.rogerscorp.com/investors.
To participate, please dial:
1-800-574-8929
Toll-free in the United States
1-973-935-8524
Internationally
The passcode for the live teleconference
is 3374029.
If you are unable to attend, a conference call playback will be
available from July 30, 2020 at approximately 8 pm ET through
August 14, 2020 at 11:59 pm ET, by dialing 1-855-859-2056 from the
United States, and 1-404-537-3406 from outside of the US, each with
passcode 3374029.
Additionally, the archived webcast will be available on the
Rogers website at approximately 8 pm ET July 31, 2020.
Additional information
Please contact the Company directly via email or visit the
Rogers website.
(Financial statements follow)
Condensed Consolidated
Statements of Operations (Unaudited)
Three Months Ended
Six Months Ended
(DOLLARS AND SHARES IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Net sales
$ 191,157
$ 242,852
$ 389,967
$ 482,650
Cost of sales
121,188
157,024
254,368
311,428
Gross margin
69,969
85,828
135,599
171,222
Selling, general and administrative
expenses
41,694
43,649
82,024
86,901
Research and development expenses
7,295
7,843
15,100
15,452
Restructuring and impairment charges
—
1,083
—
1,905
Other operating (income) expense, net
(112
)
40
(92
)
951
Operating income
21,092
33,213
38,567
66,013
Equity income in unconsolidated joint
ventures
1,022
1,742
2,240
2,579
Pension settlement charges
(55
)
—
(55
)
—
Other income (expense), net
634
(1,401
)
(152
)
3
Interest expense, net
(1,779
)
(2,038
)
(2,986
)
(3,976
)
Income before income tax expense
20,914
31,516
37,614
64,619
Income tax expense
6,394
7,223
9,835
11,927
Net income
$
14,520
$
24,293
$
27,779
$
52,692
Basic earnings per share
$
0.78
$
1.31
$
1.49
$
2.84
Diluted earnings per share
$
0.78
$
1.30
$
1.49
$
2.82
Shares used in computing:
Basic earnings per share
18,676
18,568
18,673
18,562
Diluted earnings per share
18,681
18,730
18,686
18,711
Condensed Consolidated
Statements of Financial Position (Unaudited)
(DOLLARS AND SHARES IN THOUSANDS,
EXCEPT PAR VALUE)
June 30, 2020
December 31, 2019
Assets
Current assets
Cash and cash equivalents
$ 298,742
$ 166,849
Accounts receivable, less
allowance for doubtful accounts of $1,667 and $1,691
128,697
122,285
Contract assets
19,280
22,455
Inventories
124,747
132,859
Prepaid income taxes
3,801
4,524
Asbestos-related insurance
receivables, current portion
4,292
4,292
Other current assets
11,131
10,838
Total current assets
590,690
464,102
Property, plant and equipment, net of
accumulated depreciation of $361,541 and $341,119
263,051
260,246
Investments in unconsolidated
joint ventures
16,907
16,461
Deferred income taxes
25,474
17,117
Goodwill
262,469
262,930
Other intangible assets, net of
amortization
147,722
158,947
Pension assets
4,173
12,790
Asbestos-related insurance
receivables, non-current portion
74,024
74,024
Other long-term assets
16,031
6,564
Total assets
$ 1,400,541
$ 1,273,181
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable
$ 35,616
$ 33,019
Accrued employee benefits and
compensation
25,230
29,678
Accrued income taxes payable
11,358
10,649
Asbestos-related liabilities,
current portion
5,007
5,007
Other accrued liabilities
19,654
21,872
Total current liabilities
96,865
100,225
Borrowings under revolving credit
facility
223,000
123,000
Pension and other postretirement
benefits liabilities
1,625
1,567
Asbestos-related liabilities,
non-current portion
80,696
80,873
Non-current income tax
14,554
10,423
Deferred income taxes
8,493
9,220
Other long-term liabilities
12,726
13,973
Shareholders’ equity
Capital stock - $1 par value;
50,000 authorized shares; 18,668 and 18,577 shares issued and
outstanding
18,668
18,577
Additional paid-in capital
141,092
138,526
Retained earnings
851,481
823,702
Accumulated other comprehensive
loss
(48,659)
(46,905)
Total shareholders' equity
962,582
933,900
Total liabilities and
shareholders' equity
$ 1,400,541
$ 1,273,181
Reconciliation of non-GAAP financial
measures to the comparable GAAP measures
Non-GAAP financial measures:
This earnings release includes the following financial measures
that are not presented in accordance with generally accepted
accounting principles in the United States of America (“GAAP”):
(1)
Adjusted net income, which the Company
defines as net income excluding amortization of acquisition
intangible assets and discrete items, such as acquisition and
related integration costs, asbestos-related charges, environmental
accrual adjustment, gains or losses on the sale or disposal of
property, plant and equipment, pension settlement charges,
restructuring, severance, impairment and other related costs, and
the related income tax effect on these items (collectively,
“discrete items”), and transition services, net;
(2)
Adjusted earnings per diluted share, which
the Company defines as earnings per diluted share excluding
amortization of acquisition intangible assets, discrete items,
transition services, net and the impact of including dilutive
securities divided by adjusted weighted average shares outstanding
- diluted;
(3)
Adjusted EBITDA, which the Company defines
as net income excluding interest expense, net, income tax expense,
depreciation and amortization, stock-based compensation expense,
transition services lease income and discrete items;
(4)
Adjusted operating margin, which the
Company defines as operating margin excluding acquisition-related
amortization of intangible assets, discrete items excluding pension
settlement charges, and transition services, net;
(5)
Free cash flow, which the Company defines
as net cash provided by operating activities less non-acquisition
capital expenditures.
Management believes adjusted net income, adjusted earnings per
diluted share, adjusted EBITDA and adjusted operating margin are
useful to investors because they allow for comparison to the
Company’s performance in prior periods without the effect of items
that, by their nature, tend to obscure the Company’s core operating
results due to potential variability across periods based on the
timing, frequency and magnitude of such items. As a result,
management believes that these measures enhance the ability of
investors to analyze trends in the Company’s business and evaluate
the Company’s performance relative to peer companies. Management
also believes free cash flow is useful to investors as an
additional way of viewing the Company's liquidity and provides a
more complete understanding of factors and trends affecting the
Company's cash flows. However, non-GAAP financial measures have
limitations as analytical tools and should not be considered in
isolation from, or solely as alternatives to, financial measures
prepared in accordance with GAAP. In addition, these non-GAAP
financial measures may differ from similarly named measures used by
other companies. Reconciliations of the differences between these
non-GAAP financial measures and their most directly comparable
financial measures calculated in accordance with GAAP are set forth
below.
Reconciliation of GAAP net income to adjusted net
income:
(amounts in millions)
2020
2019
Net income
Q2
Q1
Q2
GAAP net income
$
14.5
$
13.3
$
24.3
Acquisition and related
integration costs
0.4
0.4
0.3
Asbestos-related charges
—
—
0.1
Environmental accrual
adjustment
(0.2
)
—
—
Loss on sale or disposal of
property, plant and equipment
0.1
—
—
Restructuring, severance,
impairment and other related costs
0.6
1.1
3.7
Acquisition intangible
amortization
7.5
3.6
4.4
Income tax effect of non-GAAP
adjustments and intangible amortization
(1.9
)
(1.2
)
(2.1
)
Adjusted net income
$
21.1
$
17.2
$
30.7
*Values in table may not add due to rounding.
Reconciliation of GAAP earnings per diluted share to adjusted
earnings per diluted share*:
2020
2019
Earnings per diluted
share
Q2
Q1
Q2
GAAP earnings per diluted
share
$
0.78
$
0.71
$
1.30
Acquisition and related
integration costs
0.02
0.02
0.01
Environmental accrual adjustment
(0.01
)
—
—
Restructuring, severance,
impairment and other related costs
0.02
0.04
0.15
Total discrete items
$
0.04
$
0.06
$
0.16
Earnings per diluted share
adjusted for discrete items
$
0.82
$
0.77
$
1.46
Acquisition intangible
amortization
$
0.31
$
0.15
$
0.18
Adjusted earnings per diluted
share
$
1.13
$
0.92
$
1.64
*Values in table may not add due to rounding.
Reconciliation of GAAP net income to adjusted
EBITDA*:
2020
2019
(amounts in millions)
Q2
Q1
Q2
GAAP Net income
$
14.5
$
13.3
$
24.3
Interest expense, net
1.8
1.2
2.0
Income tax expense
6.4
3.4
7.2
Depreciation
7.4
7.3
7.7
Amortization
7.6
3.7
4.4
Stock-based compensation
expense
3.9
3.1
3.7
Acquisition and related
integration costs
0.4
0.4
0.3
Asbestos-related charges
—
—
0.1
Environmental accrual
adjustment
(0.2
)
—
—
Loss on sale or disposal of
property, plant and equipment
0.1
—
—
Restructuring, severance,
impairment and other related costs
0.6
1.1
3.7
Transition services lease
income
—
—
(0.3
)
Adjusted EBITDA
$
42.5
$
33.4
$
53.1
*Values in table may not add due to rounding.
Reconciliation of GAAP operating margin to adjusted operating
margin*:
2020
2019
Operating margin
Q2
Q1
Q2
GAAP operating margin
11.0
%
8.8
%
13.7
%
Acquisition and related
integration costs
0.2
%
0.2
%
0.1
%
Environmental accrual adjustment
(0.1%)
0.0%
0.0%
Restructuring, severance,
impairment and other related costs
0.3%
0.5%
1.5%
Total discrete items
0.5
%
0.7
%
1.7
%
Operating margin adjusted for
discrete items
11.5
%
9.5
%
15.4
%
Acquisition intangible
amortization
3.9
%
1.8
%
1.8
%
Adjusted operating margin
15.4
%
11.3
%
17.2
%
*Percentages in table may not add due to rounding.
Reconciliation of net cash provided by operating activities
to free cash flow*:
2020
2019
(amounts in millions)
Q2
Q1
Q2
Net cash provided by operating
activities
Non-acquisition capital
expenditures
$
46.3
(7.0)
$
8.6
(11.2
)
$
50.4
(11.4)
Free cash flow
$
39.3
$
(2.5
)
$
39.0
*Values in table may not add due to rounding.
Reconciliation of GAAP earnings per diluted share to adjusted
earnings per diluted share guidance for the 2020 second
quarter:
Guidance
Q2
2020
GAAP earnings per diluted
share
$0.58 - $0.78
Discrete items
$0.07
Acquisition intangible
amortization
$0.15
Adjusted earnings per diluted
share
$0.80 - $1.00
Reconciliation of GAAP earnings per diluted share to adjusted
earnings per diluted share guidance for the 2020 third
quarter:
Guidance
Q3
2020
GAAP earnings per diluted
share
$0.19 - $0.39
Discrete items
$0.08
Acquisition intangible
amortization*
$0.63
Adjusted earnings per diluted
share
$0.90 - $1.10
*Includes $11.7 million of accelerated intangible amortization
expense associated with the DSP business
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005983/en/
Investor contact: Steve Haymore Phone: 480-917-6026
Email: stephen.haymore@rogerscorporation.com Website
address: http://www.rogerscorp.com
Rogers (NYSE:ROG)
Historical Stock Chart
From Aug 2024 to Sep 2024
Rogers (NYSE:ROG)
Historical Stock Chart
From Sep 2023 to Sep 2024